HSPM J712

Oct. 7, 2009

Supply and Demand

• Supply side – sellers

• Fable of the marketplace– Free trading among people leads a social optimum

Free competition

• Each seller is small relative to the whole market

• None has market power– Market power means able to restrict the total

supply and thus drive up the price

• In a money-based system, each seller’s demand is elastic.– You can sell as much as you want at the going

market price.

In a free, competitive, market

• There is a going price.– If there were price differences, then arbitrageurs

would get rid of the price differences.

• Price is forced down to cost.– For the marginal seller.

• Price is a given (for the individual seller)– Seller adjusts to it

Health professionals and institutions’ political contributions

• http://www.opensecrets.org/politicians/industries.php?cid=N00024809&cycle=2010